Tax Deferral for Real Estate Investors: 1031 Exchange
Switch up your real estate investments and help your net worth grow faster by deferring tax liability. Scott Saunders from Asset Preservation and Christina Nielson from Corcapa 1031 Advisors gives you the details you need to know about 1031 exchanges.
6 free sensational apps for your properties
Information is important when making decisions. Especially when real estate investments are on the line. Here are some FREE apps that can give you some information when you are on the road and may need to make a quick decision.
1. iFixIt – There is repair information on topics like plumbing, electrical, doors, windows, appliances and even swimming pools which can give you a quick idea of what might be the problem and how to fix it.
2. Handyman Calculator – Complete construction calculator used to calculate materials and time on various projects.
3. iHandy Level – Use your phone as a fully functional level with calibration capability.
4. MagicPlan – This app can measure your rooms and draws floor plan just by taking pictures. No more tape measures!
5. Benjamin Moore Color Capture and Sherwin-Williams ColorSnap – Snap a picture of any painted wall and get a match from either manufacturer. Quick and easy!
6. Houzz – Can provide interior and exterior design inspiration with photos by style, room and location. Get inspired!
We hope you can make use of these great apps to save time and money on the properties you own.
Please list any other real estate apps in the comment section that you use that could help others. Thank you!
3 Benefits of Holding a Property in an LLC
Holding real estate in a limited liability corporation (LLC) could be a good option for your property investments. There are some real benefits to this type of structure, both from a tax and legal perspectives. Consider the following:
1. Provides protection from personal liability to all members.
2. Provides the tax benefits of a partnership.
3. Provides charging order protection to help shield the assets of the LLC.
Please note, we are not tax professionals or attorneys so ALWAYS check with your trusted professionals for your specific situation. In most cases, holding property in an LLC will provide good protection for your personal and investment property.
Please click like if you hold any property in an LLC.
Try commercial?
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In real estate investing, the focus should be finding “GREAT” deals. Never fall in love with a property. The numbers must work. Close your eyes and run the numbers. In most cases it takes time to realize a good return on a real estate investment but it’s worth the wait.
Take a look at the cap rate or capitalization rate. The cap rate is the return on the property based on the income it will generate. It is used to estimate the potential return on investment.
To calculate the cap rate, divide the net income by the total value of the property. Keep in mind that as the property value increases your cap rate will decrease, which at first glance would seem like a bad thing, but it isn’t because your property has increased in value resulting in an increase of your net worth. When this happens sometimes it’s good to sell the property and invest again!
Please share the cap rate of your investments in the comments section if you have commercial property.
The old switcheroo
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Since today is the day after US income taxes are due, now is a good time to remember it is never too early to plan your tax strategy. If you are investing in real estate you need a good CPA and to be familiar with section 1031 of the IRS code.
We are not tax professionals, so always consult your trusted CPA to provide the nitty gritty of the rules, but this opportunity applies to like kind exchanges of property. Section 1031 allows you to postpone paying tax on the gain if you sell a property and reinvest the proceeds in a similar, higher priced property. Remember, it is not tax free but tax deferred.
There are time limits on taking advantage of a 1031 exchange. First, you must identify potential replacement properties within 45 days from the date you sell the relinquished property. Second, the replacement property must be received and exchanged within a specified amount of time.
This is a great opportunity for a real estate investor to keep rolling proceeds forward into more expensive properties without immediate tax consequences. Your net worth will soar!
Have you taken advantage of a 1031 exchange? If so, please comment your experiences here!
Invest in real estate without the leg work
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Nervous about buying a property, rehabbing it then either selling it or renting it out? Just not cut out to be the big, bad landlord or seller? What if you could just invest in real estate without the leg work? You can!
The vehicle for this type of investment is called “real estate investment trusts” or REIT. A REIT can buy, develop, manage and sell assets in real estate. It is similar to other security offerings but instead of investing in a single company, you are purchasing a portion of a managed pool of real estate.
This pool of real estate can generate income through renting, leasing and selling of property. Then fund distribution occurs regularly to the REIT holder. Some very good news is that REITs MUST distribute at least 90% of their yearly taxable income, to their shareholders in the form of dividends. Nice!
Investing in REITs is a good way to get diversification without the leg work. Sit back and let someone else do it!
Please comment your thoughts on REITs.
Want to be “in the know”?
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How do you find out what is going on in the real estate market you are targeting? Some can be learned from your real estate professional, but that is only one person’s perspective. Why not get the perspective of many people in the real estate industry in your target market? Where would you go?
The local Real Estate Investor’s Association meeting! There are real estate investment groups meeting all around the country. The National Real Estate Investor’s Association website can direct you to a meeting in your target area. Check one out! These meetings can be a great resource to gain knowledge about your area, find deals or help build your team.
Please comment any real estate tips or tricks that you have learned from a real estate investor’s meeting.
You need others to be successful
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Be sure to carefully build your real estate investment team. You will need to work with others to be successful. Find professional, capable people in the following categories: Real Estate Attorney, Title company, Real Estate Broker, Mortgage Broker, Hard Money Lender, Private Lenders, Clean out crew, Demolition crew, Insurance agent, Property Management, Plumber, Electrician, and Construction companies.
Generally speaking the old adage, “You get what you pay for” can apply. Be very careful in selecting your team by make sure they are professional and capable. One good way would be to ask successful real estate investors who they use. In many cases your team can make or break your deal. Choose carefully…
Brand spanking new houses!
New home by Stuart Miles from freedigitalphotos.net
There is something to be said for brand spanking new! Speculative or spec home building can be very profitable under the right market conditions and in the right locations. It is a blast to design and build something beautiful with all the bells and whistles, then sell at full retail (hopefully). People love new houses.
Here you will be looking for a good piece of land in a nice neighborhood. Depending on your comfort level, hire either a general contractor for the entire job or sub contract with various companies yourself to complete the construction. Be sure the house you build is not at the top of the market (biggest house on the block), you should build a moderate home for the neighborhood. You will need comparable homes or “comps” to make sure the value of your home appraises at the value you intended. Always do your homework in your market to make sure the current conditions will yield good results. Look for a high demand, low inventory market to give you the best chance of success.
Are there any neighborhoods that you feel would be a good market for a spec house? Please comment.